Today is an important historical moment for Cambodia as
the Royal Government of the Third legislature of the National Assembly
meets in its first full session. As Head of the Royal Government, may
I extend my warmest welcome to Your Highness Sdech Krom Khun, Your Highnesses,
Excellencies and colleagues in the Royal Government of the third legislature
of the National Assembly.

According to the past practice of assuming functions in
a new Government, the First Cabinet Meeting (FCM) provides an opportunity
to address to all Cambodian people and international partners the policy
priorities of the Royal Government of the new legislature, and the strong
commitment of the Royal Government to successfully achieving all these
priorities, in order to serve the best interests of the nation and respond
to the aspirations and needs of Cambodian citizens, who have cast their
votes of confidence in the Royal Government through the democratic,
free, and fair general elections. Therefore, may I propose to today’s
Cabinet Meeting to start working in the spirit of this good tradition.

As I have reiterated on many occasion at the national
and international fora, I am strongly convinced that Cambodia has no
choice, but continuing to seriously implement comprehensive and deepening
reform programs. Reform is the life and death issue for Cambodia. Only
if we jointly carry out reforms, then we will be able to get rid of
the vicious cycle of poverty and bolster up a once strong and proud
nation to get back its place. On the contrary, if we avoid carrying
out reforms we will certainly miss the chance and opportunity, and the
momentum that we are having today, and our people will continue to mire
in poverty, endless conflict and instability.

In this regard, the political platform of the Royal Government
of the third legislature of the National Assembly constitutes our common
national vision and the mission statement and the will of the Royal
Government of the third legislature of the National Assembly. This platform
was developed based on the agreement between the coalition partners
in the new Royal Government and will become our most important action
plans for the next four years. At the same time I believe that in spearheading
the implementation of the political platform, the Royal Government is
required to prioritize the agreed actions by focusing on the economic
policy agenda and poverty reduction of the people. The economic policy
agenda of this political platform should be further fleshed out in some
more details, sequence and systematically packaged by sectors and developed
into intertwined and mutually reinforced, understandable and manageable
program. In this spirit, I wish to submit to today’s FCM and inform
the Cambodian people and all development partners of Cambodia of the
“Rectangular Strategy” for growth, employment, equity and efficiency
in Cambodia, which will become an important tool to support the implementation
of “the political platform of the Royal Government of the third legislature
of the National Assembly.”

Please allow me to elaborate this strategy as follows:

Part 1: The Principle Ingredients of the Rectangular
Strategy

1.1. The Key Objectives of the Royal Government
of Cambodia during the Third Legislature of the National Assembly

The people of the Kingdom of Cambodia expressed their
collective will on 27 July 2003, through the general elections recognized
by national and international observers as free, fair, transparent,
and credible. The Royal Government of Cambodia has taken office in the
third legislature of the National Assembly, humbled by the people’s
will and fully committed to peace and national reconciliation, stability
and social order, democracy and respect for human rights, national independence,
sovereignty and territorial integrity, and sustainable development that
will establish progress, prosperity, harmony, decent livelihood and
dignity for Cambodians from all walks of life and the entire nation.

The over-riding goal of the Royal Government of Cambodia
during the third legislature of the National Assembly is to firmly and
steadily build Cambodian society by strengthening peace, stability and
social order, entrenching democracy, promoting respect for human rights
and dignity, ensuring sustainable and equitable development, and strengthening
Cambodia’s social fabric to ensure that the Cambodian people are well-educated,
culturally advanced, engaged in dignified livelihood and living in harmony
in family and society.

The Royal Government of Cambodia stands fully committed
to the policy of national solidarity and the mobilization of national
strength contributed by all sectors and all political affiliations both
domestic and international, harmonized under the motto of “Nation, Religion,
King,” and thereby unified as one to build and defend the nation and
protect the achievements of the Kingdom of Cambodia in the context of
national independence, sovereignty, territorial integrity, peace, democracy
and progress as guided the wisdom and leadership of His Majesty Norodom
Sihanouk, King of Cambodia and Her Majesty Queen Norodom Monineath Sihanouk.

In its second term from 1998-2003, having scrupulously
implemented the Triangle Strategy, the Royal Government of Cambodia
succeeded to ensure a favorable environment and the sine qua non conditions,
both internally and externally, for Cambodia to move forward, with strong
hope and confidence on the path of reforms and sustainable development.

The success of the Royal Government in implementing its
“win-win” policy has enabled the profound transformation of Cambodia
from a region of uncertainty, war, internal strife, instability and
backwardness into an epicenter of sustained peace, security and social
order, respect for democracy, human rights and dignity, cooperation
and shared development. Over a very short period relative to the long
histories of many developed countries, the Royal Government has demonstrated
that Cambodia is fully capable of engagement on an equal footing with
all partners, in regional and international affairs. The positive gains
so far achieved have bolstered confidence in Cambodia’s bright future,
shoring up the foundations for dynamic enterprise, increased trade,
investment flows and tourism that will generate employment and incomes
for Cambodians, thereby reducing poverty and improving the well-being
of our people.

At the forefront of the political agenda of the Royal
Government in the third legislature of the National Assembly are the:
(a) promotion of economic growth; (b) generation of employment for all
Cambodian workers; (c) implementation of the Governance Action Plan
and thereby ensuring equity and social justice; and (d) enhancing efficiency
and effectiveness of the Royal Government in implementing the reform
programs in all sectors to reduce poverty and achieve sustainable development.
In this regard, as head of the Royal Government, I would like to set
out the Rectangular Strategy as a supporting tool to implement the political
platform of the Royal Government in the third legislature of the National
Assembly, to attain poverty reduction, development, progress, prosperity,
national harmony and happiness of the Cambodian people.

1.2. The Political Rationale of the Rectangular
Strategy

First, the Rectangular Strategy is set out to ensure the
continuity and to further strengthen the achievements attained in the
second legislature of the National Assembly through the implementation
of the Triangular Strategy. The Rectangular Strategy selects key elements
from the Millennium Development Goals, the Cambodia Socio-Economic Development
Program 2001-2005 (SEDP2), the Cambodia National Poverty Reduction Strategy
2003-2005(NPRS), and the various policies, strategies, plans and other
important reform programs, all of which have been formulated through
broad consultation with all national and international stakeholders
– including government ministries and institutions, representatives
of civil society and the donor community, with an objective of improving
and building capacity of public institutions, strengthening good governance,
and modernizing national economic infrastructure that will help to promote
economic growth, generate employment for all citizens, ensure social
equity, enhance efficiency of the public sector and protect the nation’s
natural resources and cultural heritage.

All of these are crucial for promoting sustainable development
and poverty reduction.

Second, key elements of the Rectangular Strategy are established
as the foundation of the economic policy of the Royal Government for
the new legislature, and are fully reflected in “political platform
of the Royal Government in the third legislature of the National Assembly”;
and

Third, the political platform of the Royal Government
in the third legislature of the National Assembly has been finalized
upon the unanimous agreement between the two coalition partners in the
Royal Government. Thus each and every key element of the economic policy
of this political program has been revisited, screened and streamlined
into the rectangular strategy by highlighting and interweaving the priority
policy measures in a systematic and mutually-reinforcing fashion.

Therefore, the rectangular strategy is the successor of
the Triangular Strategy of the Royal Government in the second legislature
of the National Assembly, and thereby establishes the key facets of
the Royal Government of Cambodia’s development strategy for the third
legislature of the National Assembly. Geometrically, the Triangular
Strategy clearly demonstrated its capacity to withstand strong challenges
and adversity, remaining stable and unbowed in any circumstance. Therefore,
the rectangular strategy may be depicted as an integrated structure
of interlocking rectangles that represent sustainability and stability
in the same way as a strong table or chair firmly stands on four pillars.
Indeed, the successful implementation of the Rectangular Strategy shall
ensure national stability and sustainable development in Cambodia.

On the other hand, the rectangular strategy constitutes
the Economic Policy Agenda of the Political Platform of the Royal Government
in the third legislature of the National Assembly. The rectangular strategy
has been formulated and prepared by screening, highlighting and streamlining
the reform programs into a comprehensive, systematic, intertwined, mutually-reinforcing
package of priorities that is easily understood and thus serving as
a key tool for the Royal Government and its development partners to
implement and manage the economic policy agenda of the nation.

The rectangular strategy aims to promote economic growth,
full employment for Cambodian workers, equity and social justice, and
enhance efficiency of the public sector through the implementation of
the Governance Action Plan and in-depth reforms that are coordinated
and consistent across all levels and sectors. Thus, the Royal Government
in the third legislature of the National Assembly shall the “Government
of Growth, Employment, Equity and Efficiency”.

1.3. The Structure of the Rectangular Strategy

The rectangular strategy is an integrated structure of
interlocking rectangles, as follows:

First, the core of the rectangular strategy is good governance,
focused at four reform areas: (1) anti-corruption, (2) legal and judicial
reform, (3) public administration, and (4) reform of the armed forces,
especially demobilization;

Second, the overall environment for the implementation
of the rectangular strategy consists of four elements: (1) peace, political
stability and social order; (2) partnership in development with all
stakeholders, including the private sector, donor community and civil
society; (3) favorable economic and financial environment; and (4) the
integration of Cambodia into the region and the world.

Third, the four strategic “growth rectangles” are: (1)
enhancement of agricultrual sector; (2) private secter development and
employment generation; (3) continued rehabilitation and construction
of physical infrastructure, and (4) capacity building and human resource
development.

Rectangle 2: Further Rehabilitation and Construction of Physical
Infrastructure, involving: (1) further restoration and construction
transport infrastructure (inland, marine and air transport); (2)
management of water resources and irrigation; (3) development of
energy and power grids, and (4) development of information and communication
technology.

Rectangle 3: Private Sector Development and Employment Generation
covers (1) strengthened private sector and attraction of investments;
(2) promotion of SMEs; (3) creation of jobs and ensuring improved
working conditions; and (4) establishment of social safety nets
for civil servants, employees and workers; and

Good governance is the most important pre-condition to
economic development with sustainability, equity and social justice.
Good governance requires a wide participation, enhanced sharing of information,
accountability, transparency, equality, inclusiveness and the rule of
law. In this regard, good governance will ensure that corruption be
reduced to the minimum, the view of minorities and the voices of the
most vulnerable in society be fully heard and considered in decision-making
processes. Indeed, the attainment of good governance is crucial to the
poorer functioning of society both in the present and the future.

To achieve good governance, the Royal Government of Cambodia
will focus on the effective implementation of its Governance Action
Plan which covers four crosscutting areas of reforms: (i) combating
corruption, (ii) judicial and legal reform, (iii) civil service reform
covering decentralization and de-concentration, and (iv) reform of the
armed forces, especially demobilization.

i. Fighting Corruption

The key thrust of the Royal Government of Cambodia’s strategy
to fight corruption is to take concrete actions that attack the roots
of corruption. The implementation of the anti-corruption strategy will
be supported with enough tools and resources to prevent and to substantially
crack down on corrupt entities. Implementation is crucial because laws,
regulations and codes of conduct are not sufficient to successfully
fight corruption. Indeed, there must be efforts and mechanisms to strengthen
the effectiveness of law enforcement.

In fighting corruption, the Royal Government of Cambodia
will, as soon as possible, ensure the adoption of the Anti-corruption
Law and create an independent body to fight corruption. The Royal Government
will also promote effectiveness, transparency and accountability in
the management of public finances, especially through the strengthening
of audit processes and public procurement. The Royal Government shall
also promote the implementation of the multi and cross-sectoral governance
reforms, especially those guided Governance Action Plan, which has been
developed with broad participation from various government ministries
and institutions, civil society and development partners. From this
3rd legislation onwards, the Royal Government of Cambodia will enable
the responsible ministries and institutions to review and check on the
commercial contracts and concession agreements on natural resources
and state assets.

ii. Judicial and Legal Reforms

The Royal Government of Cambodia will respect and promote
the independence and neutrality of the judicial system as stated in
the Constitution and thus the independence of the Supreme Council of
the Magistracy shall be vigorously upheld and protected. The Royal Government
will promote legal and judicial reforms and ensure the independence
of the court system through the implementation of key policies and strategies
developed by the Council of Legal and Judicial Reform, thereby enhancing
the confidence of the national and international community, and closely
cooperating with development partners to strengthen the rule of law,
promote social justice, reduce corruption, eliminate the culture of
impunity, and strengthen the culture of peace and the primacy of law.

The Royal Government will prepare priority action programs
and projects that will steadily reform the judicial and legal system,
focusing on the finalization and submission to the National Assembly
of draft basic laws such as the Statue of Judges, the Law on Organization
of the Court, the Criminal Code, the Law on Criminal Procedures, the
Civil Code, the Law on Civil Procedures, the Law on the Organization
and Functioning of Notaries Public, and the Law on the Organization
and Functioning of Bailiffs. Other laws and regulations are also
necessary to complete the legal framework required for Cambodia’s full
international engagement, especially within the context of the ASEAN
ad the World Trade Organization.

More importantly, the Royal Government will establish
special courts as needed, such as the Commercial Tribunal, the Juvenile
Tribunal, the Labor Tribunal, and the Administrative Tribunal. Moreover,
pilot courts will be gradually introduced to enhance the quality and
effectiveness of judicial services. Also priority is the enhancement
of the capacity and responsibility of judges through the enforcement
of the Statute of Judges, improved discipline through the enforcement
of the code of conduct and through continuing training. The Royal Government
will establish institutions for the training of court clerks, bailiffs
and notaries. We will provide training and improve management of the
judicial police. Furthermore, attention will also be directed to the
provision of legal aid (including pro-bono legal professional services)
to the poor who require legal and judicial protection and assistance.
Finally, the Royal Government will enhance mechanisms for conflict resolution
outside of the court system, particularly in the settlement of disputes
related to the ownership and property rights of unregistered lands.

iii. Public Administration Reform

The Royal Government recognizes that the strengthening
of industrial capacity is crucial to sustainable development. The administrative
system and the civil service must be neutral, transparent, professional,
responsive and responsible. The Royal Government has adopted the National
Program for Administrative Reform to transform the administration and
civil service into an effective organization for the successful implementation
of the Government’s political platform. Consistent with this thrust,
the Royal Government will focus on delivering public services to the
people with quality and effectiveness in four priority areas: (1) services
related to the sovereignty of the state (including vital records, permits
and land registration titles), (2) services related to investments,
(3) basic services, especially education and health, and (4) services
related to revenues collection and expenditure of the state.

The provision of public services will be facilitated and
simplified through the elimination of overlapping work, streamlining
the bureaucracy, implementation of decentralization and de-concentration
at the commune level, establishment of a “single window” for services
applications and the opening of a citizen’s office. These procedures
will be gradually computerized to improve transparency and reduce corruption.
Special attention shall be focused on the management of civil servants
to move the public administration closer to the people consistent with
decentralization and de-concentration and the transfer of authority
from upper to lower levels of the bureaucracy. This measure shall be
facilitated by the clear definition of the roles, powers and responsibilities
of the various authorities at the levels of the province, city, district
and commune, as well as the introduction of information technology.
The process to rationalize the civil service shall be continued to gradually
raise the salaries of all civil servants by 10 to 15 per cent per year
to improve their living standards to an appropriate and dignified level.

The Royal Government recognizes that the implementation
of decentralization to the commune is crucial to the strengthening of
democracy at the grassroots level, improving the quality of public services
and participatory local development in all sectors. A key priority in
local governance is to build local management capacity, provide reasonable
levels of financial resources to the communes and promote the culture
of participation. Indeed, decentralization must be implemented in conjunction
with de-concentration to build capacity at the municipal, provincial,
and district levels, and thereby ensure harmonized and mutually-supportive
and complimentary operations with and among the grassroots-level communities.
Therefore the Royal Government will proceed, as soon as possible, with
the appointment of village chiefs, deputy village chiefs and the members
of the village committees in accordance with the principles of decentralization
at the commune level.

iv. Reform of the Royal Cambodian Armed Forces

The Royal Government will continue to implement the policy
and programs identified in the White Book of National Defense of the
Royal Cambodian Armed Forces, including the distribution of social concession
lands to the demobilized landless soldiers who request for land for
their residences and/or for family farming in conformity with the Sub-decree
on Social Concessions. The Royal Government will continue to reform,
build and strengthen the national police into a professional force,
equipped with modern technology, and capable of discharging its responsibilities
with due respect for law and human rights, thereby enabling the police
to serve the people, maintain security, social order and harmony and
protect the people’s safety and property.

2.2. Environment for the Implementation of the
Rectangular Strategy

i. Peace, Political Stability and Social Order

Peace, political stability and social order constitute
the most important conditions for strengthening macro-economic stability
and promoting sustainable development and poverty reduction. Therefore,
the Royal Government will continue to further strengthen peace, political
stability and social order, reflecting the nation’s decisive move towards
development and prosperity, leaving behind the legacy of wars, genocide
and internal strife that have destroyed Cambodia over the past three
decades.

Peace, political stability and social order are crucial
for building the state and implementing state reform. Therefore, the
top priority of the Government is by all means to strengthen the fabric
of peace. Moreover, the strengthening of peace, political stability,
and social order will promote a “credible image” of Cambodia, build
the confidence of investors and tourists in the country and generate
favorable conditions for the people’s dignified livelihoods that significantly
contribute to economic development.

ii. Partnership in Development

The Royal Government considers as a top priority the strengthening
of partnerships with all development partners, including the donor community,
the private sector and civil society. The mechanism of partnership with
the donor community shall be established consistent with the Resolution
of the General Assembly of the United Nations, the principles of the
Organization for Economic Cooperation and Development – Development
Assistance Committee, as well as the initiatives of the Word Bank and
the United Nations Development Program.

The Royal Government considers the private sector as an
engine of growth. Therefore, the strengthening of partnerships between
the Government and private sector must be harmonious, allowing for rationalized
interventions focused on development and the strict enforcement of laws
and regulations, with the effective support and facilitation by the
relevant Government agencies. Therefore, the “Government-Private Sector
Forum” will be further strengthened to enhance its effectiveness as
a mechanism of partnership between the public and private sectors.

The Royal Government continues to strengthen cooperation
between the state and civil society based upon the rule of law to enhance
democracy, freedom, social order and the primacy of law. Civil society
shall become an effective partner of the Government in nation building.
To this end The Royal Government will encourage the activities of the
non-governmental organizations and other duly-registered associations.
Working to serve and benefit the people and the nation. The Royal Government
welcomes the participation of NGOs in the process of socio-economic
rehabilitation and development and the promotion of democracy and respect
of human rights. In this regard, The Royal Government will speed up
the drafting, adoption and i9mplementation of the Law on Non-Governmental
Organizations, with broad consultation with all relevant institutions
and organizations.

iii. Favorable Macroeconomic and Financial Environment

Building on its achievements in macroeconomic and fiscal
management, the Royal Government will endeavor to achieve economic growth
in the order of 6 to 7 per cent per year, maintain low inflation to
a single digit, keep the exchange rate stable and increase international
reserves. The Royal Government will maintain a prudent monetary policy,
including a market-based exchange rate. The policy of de-dollarization
will be cautiously continued, reflecting the development of the domestic
and international economies.

The maintenance of strict budget discipline is crucial
to ensure a favorable macroeconomic and financial environment to consolidate
the foundation for sustainable and equitable economic growth. The Royal
Government is committed to improve the collection taxes and non-tax
revenues, including the strict implementation of the Law on Taxation,
the reduction of corruption and tax evasion, dismantling of the culture
of tax exemptions, broadening the tax base, strengthen tax and customs
administration, and the strict management of state assets including
tangible and intangible properties, as well as state enterprises and
joint-ventures. The Royal Government will further implement reforms
in public financial management, especially by rationalizing expenditures
based on the principles of transparency, accountability and economic
efficiency and improving audit and public procurement, according priority
to social and economic expenditures and public investment especially
physical infrastructure. Budget operations, on both the revenue and
expenditure side, shall be executed in accordance with established norms
and procedures.

Based on the above priority policies, as head of the Royal
Government in the third legislature of the National Assembly, I would
like to introduce 10 disciplines (or commandments) in the public financial
management, which all members of the Royal Government are obliged to
fully respect at all times, namely:

Discipline 1: continue to root out the “culture of tax
waiver and tax exemptions” in Cambodia;

Discipline 2: take serious actions to ensure collection
of all kinds of revenues as planned or go beyond the target;

Discipline 3: timely transfer all revenues to the National
Treasury. It is forbidden to retain and use collected revenue to offset
extra-budgeted expenditures, including the mechanism of off-setting
revenue and expenditure, advanced commercial loan from companies and
earmarking revenue to pay back expenditure;

Discipline 4: to be courageous and determined to fighting
against all kinds of smuggling, and pursuing the recovery of arrears
from government’s debtors, especially the recovery of the arrears
from taxpayers;

Discipline 5: target expenditure to priority goals of
development and take serious strides to cut expenditure on unnecessary
or not yet necessary items, and make budget savings and reduce wastages;

Discipline 6: Strengthen and further enhance the implementation
of laws and regulations related to public procurement;

Discipline 7: strengthen audit in budget management
(on both revenue and expenditure side) including the inspection by
the Ministry of Economy and Finance, internal audit of their respective
ministries and institutions, and independent external audit;

Discipline 8: it is forbidden to sign contracts with
private companies that are delinquent on tax obligations, and state
revenue and expenditure, without the participation and approval from
the Ministry of Economy and Finance;

Discipline 9: it is forbidden to contract commercial
credit; and

Discipline 10: take serious strides to strengthen the
management of all forms of state assets by fully enforcing the laws
and regulations related to state asset management.

The Royal Government is conscious that increasing domestic
savings is crucial for the long-term economic development of Cambodia.
Thus the Royal Government will continue to implement measures to strengthen
the domestic banking system by improving management, strengthen bank
supervision and surveillance and enhancing the mobilization of savings
to finance private investment projects and thereby promote economic
growth. The Royal Government will continue to strengthen the rural finance
sector to enhance financial services including low-interest loans within
the framework of the market economy, considering the experiences of
other ASEAN countries in the provision of financial services to the
poor, low-income families and small and medium enterprises that promote
rural development and raise living standards in rural and remote areas.
Moreover, the Royal Government will take serious steps to develop laws
, regulations and capacity of institutions in the mobilization of domestic
resources through continuously reforming and improving the tax system,
strengthening commercial banks and the insurance sector, and establishing
a capital market consistent with Cambodia’s Vision and Plan for Financial
Sector Development for 2001-2010, developed with the technical assistance
from Asian Development Bank and adopted by the Government in August
2001.

iv. Cambodia’s Integration into the Region and the World

The Royal Government will continue to push for the integration
of Cambodia into the region and the world, specifically focusing on
bridging the development gaps among member-countries of the Association
of South East Asian Nations by promoting full partnership in the implementation
of the various elements of the Initiatives for ASEAN Integration as
adopted by the ASEAN Summits, in particular the measures and projects
adopted by the 8th Summit in November 2002 in Phnom Penh. The Royal
Government will also continue its active participation in the implementation
of Greater Mekong Sub-region Program, especially the flagship programs
adopted by the 1st Summit of Greater Mekong Sub-region Program in Phnom
Penh in November 2002 and the projects under “the Development Triangle
Zones” between Cambodia, Viet Nam and Lao PDR and “the Development Triangle
Zones” between Cambodia, Lao PDR and Thailand, and “the Economic Cooperation
Strategy” among Cambodia, Lao PDR, Thailand, and Myanmar. To maximize
the gains from international integration, Cambodia must strengthen its
institutional capacity to implement cooperative strategies with neighboring
countries such as the concept of “Four Countries-One Economy”, the creation
of the triangles for economic growth and the establishment of cross-border
Economic Processing Zones.

There is worldwide recognition that free trade significantly
contributes to the reduction of poverty and improvement of the living
standards of the people. Thus the Royal Government will continue to
liberalize trade and ensure free flow of goods and services both within
the country and between Cambodia and other key partners in the region
and the world. Increasing the unfettered access of Cambodian products
to the regional and world markets will provide Cambodia with the economy
of scales and opportunities that attract investment, create employment,
generate increased incomes and accelerated economic growth that result
in poverty reduction. Indeed, Cambodia’s participation in the ASEAN
Free Trade Area and accession to the World Trade Organization (WTO)
constitute strategic and historical steps in the rehabilitation and
development of Cambodia.

The Royal Government will strictly implement its obligations
under the World Trade Organization, recognizing that Cambodia’s membership
in the WTO requires great efforts in the formulation, adoption and the
implementation of laws, regulations, procedures, and methodology for
valuation, assessment report on the effects of trade protection, studies
on rice production and agricultural markets, agricultural value chain
analysis, handicrafts, pure drinking water, fisheries, factories, tourism
and other labor services that Cambodia can benefit from WTO. The Royal
Government is strongly committed to using this opportunity to embark
on reforms in all sectors.

2.3. The Strategic Rectangles: Four Strategies
to Accelerate Growth

Rectangle I: Enhancement of the Agricultural Sector

Side 1: Improving Agricultural Productivity and Diversification

In the last legislature, the Royal Government successfully
promoted economic growth. However, the economic growth of Cambodia has
been narrowly based, largely upon garments and tourism and rendering
the economy relatively vulnerable to external shocks. Indeed it is necessary
to enhance and broaden the base for economic growth by opening and utilizing
the potentials The agriculture policy of the Royal Government is to
improve agricultural productivity and diversification, thereby enabling
the agricultural sector to serve as the dynamic driving force for economic
growth and poverty reduction. Thus the Royal Government will invest
substantial domestic resources to promote agricultural intensification
and diversification to bolster economic growth, create employment and
generate income in the rural areas, thus ensuring nutritional improvement,
food security and increased agricultural exports. In this regard, shifting
the direction from “expansionary” or extensive” agriculture to “deepening”
or “intensive” agriculture especially by increasing the yields using
the existing land through intensification has become the top priority
of the Royal Government.

The Royal Government will create a favorable environment
conducive to private sector participation in the agriculture sector
enterprise by accelerating the distribution of land and the issuance
of secure land titles within the framework of social land concessions,
particularly in the rural areas. The Royal Government shall also ensure
the development of irrigation facilities and water resource management
by improving productivity of the existing irrigation systems, further
creating and enhancing quality of water user communities and as well
as reducing vulnerability to natural disasters.

To increase agricultural productivity, the Royal Government
will put more emphasis on expanding support services such as agricultural
research and extension, development of markets for agricultural product,
distribution of inputs, seeds, fertilizer and the increased supply of
rural credit. The Royal Government will accord special emphasis on directing
public investment and encouraging private investment in agriculture
to increase agricultural production while ensuring that the quality
of Cambodian agricultural products are improved toward international
standards.

The Royal Government will continue to accord priority
to the development of border and remote areas to control migration,
and also focus on the development of township centers adequately equipped
with infrastructure that facilitate resident’s livelihood and local
economic activities.

The Royal Government will continue to promote the “one-village
one-product” movement to encourage creativity and confidence of the
rural people by adopting four principles: (1) encouraging modes of production
suited to village contexts and market needs, (2) facilitating and encouraging
appropriate market identification, financing, technology transfer and
inputs supply, (3) provision of human resource development and training
in management, and (4) facilitating the creation of agricultural communities
to enable stable and remunerative product prices.

Side 2: Land Reform and De-mining

Land and water are the two fundamental natural resources
that serve as the basis for socio-economic development and poverty reduction,
especially in the rural areas. The Royal Government will continue to
implement the Law on Land Management and land policy to strengthen an
equitable and efficient system of land management, distribution and
utilization, including land restoration and distribution, land tenure
security, eradication of illegal settlements and land grabbing, and
the control of land ownership concentration for speculative purposes.
The Royal Government will review idle and vacant State lands, as well
as State land illegally occupied by private entities in contravention
with the regulations and procedures. The Royal Government will continue
to accord priority to the strengthening of land tenure rights of the
people who need small lots for settlement and family production within
the social land concession framework, as a mechanism to assist poor
households and vulnerable groups.

The Royal Government is aware that de-mining is not only
a security-related issue but also has significant economic implications,
particularly on land distribution and the security of poor faming households
in remote areas. Thus the Royal Government will guide the implementation
of de-mining in Cambodia in accordance with international security standards
and international obligations to ensure safe, well-coordinated implementation
of the national de-mining plan.

Slide 3: Fisheries Reform

Fish is crucial to the lives of million of Cambodians
in terms of food, income and livelihoods. Fish and rice enable food
security, contributing three-quarters of protein supplies to more that
two million people. The Royal Government has enabled the community based
development of the fisheries sector by empowering local communities
so that farmers can participate directly, actively and equitably in
fishery plans, programs and management.

The Royal Government will transform some of the fishing
lots whose concession contracts have expired into fish sanctuaries,
thereby helping increase natural fish stocks, and conserve endangered
species. Community-based fishing lots will be expanded and aquaculture
promoted to respond to the increasing needs for fish as well as reduce
the pressure on fisheries resources.

Side 4: Forestry Reform

The goal of the forest sector strategy of the Royal Government
will ensure sustainable forestry management based on the three pillars
as follows:

Sustainable forest management policy, to ensure the rational
and strict monitoring of forest exploitation according to the international
best practices in forest management that require adequate forest
reserves for domestic consumption, protection against drought and
floods as well as wetlands that serve as fish sanctuary,

Protected area system to protect biodiversity and endangered
species; and

Community forestry as a sound, transparent and locally managed
program

The Royal Government has reviewed the remaining forest
concessions, cancelled many concessions found violating the agreement,
and evaluated the concession system to ensure efficient management.
The Royal Government will also continue to promote reforestation.

Rectangle II: Further Rehabilitation and Construction
of Physical Infrastructure

Side 1: Further Rehabilitation and Construction of the
Transport Network

Transportation networks are the arteries that connect
all corners of the Kingdom of Cambodia and thereby transform the country
into tan integrated economy. The transport networks are instrumental
in integrating domestic markets and facilitating Cambodia’s integration
into the regional and world economies. Moreover, physical infrastructure
plays a pivotal role as the “locomotive of economic growth,” significantly
contributing to poverty reduction and the alleviation of the people’s
hardships.

Thus, the Royal Government will continue to accord high
priority to the rehabilitation and reconstruction of transportation
networks, including bridges, roads, railroads, seaports, and airports
that link all parts of the country and link Cambodia to neighboring
countries and the rest of the world. The objective is to create a convenient,
comprehensive, safe, effective and price-efficient transport network
that facilitates trade, promotes tourism and rural development and ensure
Cambodia’s economic integration into the region and into the world,
while especially serving the interests of national defense. Therefore
high priority will be given to the further building of rural roads,
coupled with measures on road maintenance to ensure continuing transport
services and travel safety. The Royal Government will further its efforts
in the rehabilitating and developing railroads and promoting rail transport
of bulk and heavy goods. Civil aviation will be further enhanced to
ensure the significant contribution civil aviation services to economic
growth, especially in boosting tourism.

Side 2: Water Resources and Irrigation System Management

The national policy on water resources and irrigation
is a part of broad program to protect, manage and assure sustainable
exploitation of both fresh water and marine resources while enhancing
bio-diversity and sustainability for equitable benefit to the public.
The objectives are to anticipate and prepare ourselves to meet the growing
challenges facing Cambodia’s water resources in the next 20 years by
adopting relevant measures.

Thus the Royal Government will focus on: (1) providing
all citizens with clean and safe water; (2) protecting all citizens
from water-related diseases; (3) providing adequate water supply to
ensure food security, economic activities and appropriate living standards;
and (4) ensuring water resources and an environment free from toxic
elements, while enabling a supportive fisheries and ecological system.

The Royal Government will develop and expand irrigated
lands and effective water resources management by improving the efficiency
o0f the existing irrigation system, further developing and enhancing
the effectiveness of water communities and reducing the vulnerability
of the population to natural disasters and its total dependence on natural
conditions.

Side 3: Development of the Energy Sector and Electricity
Network

One of the most important aspects of the Royal Government’s
economic policy is the further development of the energy sector to effectively
respond to the increasing needs for low-cost electricity. Thus the Royal
Government places high priority on attracting private sector investment
and participation in electricity production and distribution, especially
in key provincial and urban centers, as well as investment in rural
electrification to provide the rural areas with quality and low-cost
electricity. The Royal Government will also support the establishment
of power transmission grids linking Cambodia with neighboring countries.

The rehabilitation and expansion of electricity generation
and distribution in Phnom Penh will be further continued with the imports
of electricity from neighboring countries and the construction of as
thermal power plant in the coastal zone. The Royal Government plans
to install power generating plants in Kamchay, Stung Battambang, Stung
Atay, and Stung Russeychrum. In developing hydro power resources, the
Royal Government will carefully analyze all aspects involved, especially
its economic benefits and environmental and social impacts.

Side 4: Development of Information and Communications
Technology

The Royal Government will further develop an efficient
and world class posts and telecommunications system incorporating advanced
information technology, paying close attention to cost efficiency, modernization
and nation-wide coverage, through the implementation of the following
measures:

Further promotion of investment in backbone infrastructure for
information and communication technology, especially high-speed
optical fiber cable, which will also contribute to the development
of rural telecommunication systems;

Establishment of comprehensive telecommunications networks in
Phnom Penh, Sihanoukville and Siemreap, while expanding telecommunications
services into the smaller cities and towns;

Adopting national guidelines on investment plans and cooperation
for telecommunications facilities, services and information technology,
including standards and regulations on the use and practice of information
technology and use of internet;

Strengthening the postal network and its institutional capacity
to improve services, and

Expanding radio and TV broadcast networks to improve efficiency
and to facilitate information ands postal service.

The Royal Government will enhance the implementation of
an open policy in promoting private sector participation in information
and telecommunication technology without discrimination, consistent
with Cambodia’s commitments and obligations as a member of the WTO.

Rectangle III: Private Sector Development and
Employment Generation

Side 1: Strengthening the Private Sector and Attracting
Investments

The Royal Government considers the private sector as the
engine of economic growth, while the Government plays its role as the
strategist in creating an environment conducive to enhance private enterprise
and the manager of development process. A healthy private sector is
the key to the promotion of economic development and the Royal Government
will continue its efforts to access the international markets through:
(i) implementation of policy of economic integration of Cambodia into
the regional and world economy; (ii) development of both software and
hardware national infrastructure networks; (3) strengthening of the
legal framework for enterprise, including laws, regulations and institutional
capacity that facilitates business, trade and private investment, especially
fair competition, transparency, accountability and fruitful partnership
between private and public sectors.

A particular priority of the third legislature is the
preparation of measures that enable the environment conducive to private
sector development through concrete measures which aim at: (i) strengthening
both public and corporate governance; (ii) facilitating trade and improving
the climate for investment, and (iii) promoting human resource development
to effectively respond to market needs.

In the third legislature, the Royal Government will continue
to focus on attracting private sector participation in the six priority
sectors, which are:

Development of agriculture and agro-industry by giving priority
to agricultural irrigation;

Development of transport and telecommunications infrastructure
systems;

The Royal Government has committed itself to the promotion
of SMEs through the following policies: (i) encourage the development
of SMEs, especially through the provision of medium and long-term finance;
(ii) suppress smuggling; (iii) reduce registration procedures and start-up
process for companies; (iv) facilitate export-import activities by simplifying
procedures such as licensing and other letters of permission; (v) support
for newly –established industries for an appropriate period; (vi) promote
linkage between SMEs and large enterprises; (vii) establish a national
center for productivity to assist SMEs enhanced their productivity and
reduce production costs; (viii) establish a national standards institution
to help ensure the quality of domestic products to meet regional and
international standards, (ix) establish national laboratories for physics,
chemistry, micro-biology, mechanics and tests for quality and criteria
of products; (x) strengthen mechanisms for the protection of industrial
intellectual property rights, to prevent illegal copying, recreation
and illegal use of new techniques and technology; (xi) promote vocational/skills
training, both domestic and overseas; (xii) expand and accelerate the
“one-village one-product” program; and (xiii) strengthen the legal framework
by creating laws on concerns such as: factories, industrial zones, patents
and inventions, measurements and industrial safety.

Side 3: Job Creation and Ensuring Better Working Conditions
for Workers and Employees

The Royal Government will implement a systematic policy
aimed at: (i) creating more jobs, especially for young people entering
the labor market, and for all Cambodian laborers through various measures
which encourage domestic investment and attract foreign direct investment
in priority sectors, especially agriculture, agro-industry, labor intensive
industries and tourism; (ii) establishing skills training networks for
the poor, linked to employment assistance especially for young people
and new graduates in response to labor market needs; and (iii) developing
a labor statistical system. More attention will be focused on improving
the management of foreign workers in Cambodia to create jobs for Cambodian
citizens and facilitate the transfer of new technology for national
development.

Employment and training policy and programs will include
opportunities for job mobility, information technology and vocational/skill
training, while effectively linked to education policy. The export of
workers provides another important option for poverty reduction, as
seen in the experience of neighboring countries. The Royal Government
encourages official labor exports to increase welfare, improve capacity,
reduce unemployment, and increase revenue.

Investment in urban areas is the important policy tool
to support the poor if the investment generates productive employment
to absorb the inflow of surplus laborers from the rural areas. Growth
in labor-intensive industries, such as garments, generates a strong
foundation for increased per capita incomes and thereby reduces poverty.
Moreover, the development of labor-intensive manufacturing has helped
to absorb rural labor and promote income generation, therefore making
contribution to the reduction of rural poverty.

The Royal Government has introduced programs to increase
agricultural productivity to increase the quantity of agricultural products
and thereby generate increased incomes and improved living standards,
particularly through job creation via agricultural intensification and
diversification. This approach is clearly superior to overt mechanization
that reduces jobs for farmers. The strategy for accelerated growth in
agricultural products will have important cross-sectoral multiplier
effects through increased demand for goods and services.

Side 4: Establishment of Society Safety Nets for Civil
Servants, Employees and Workers

Through enhanced cooperation with national and international
organizations, the Royal Government will increase its social sector
interventions, thereby improving employment opportunities, reducing
vulnerability of the poor, enhanced emergency assistance to victims
of natural disasters and calamities, and expanded rehabilitation programs
for the disabled, including welfare improvement programs for the elderly,
orphans, female victims, the homeless, and the veteran and their families.

The Royal Government continues to support the disabled
people and veterans and their families, especially those who have sacrificed
their lives for the country. The Government will encourage owners of
enterprises and factories to provide fair wages and gradually introduce
pension schemes for workers in accordance with market conditions.

The Royal Government will seriously enforce the Labor
Law and other international conventions related the role of trade unions
in order to ensure the rights and benefits of workers, employees and
employers. The Royal Government will put special priority on improving
the working conditions of workers and employees, enhance the implementation
of the Law on Social Security, encourage the implementation of pension
funds especially pensions for disability and dependents, and insurance
for work accidents as stipulated in the Labor Law.

Rectangle IV: Capacity Building and Human Resources
Development

Side 1: Strengthening the Quality of Education

The Royal Government has set out a comprehensive strategy
on education, as expressed in detail in the Education Sector Support
Program for 2001-2005. The strategy aims to enhance capacity of human
resources with high technical and scientific skills that effectively
respond to labor market ne3eds in terms of entrepreneurship, high creativity,
responsibility, discipline, morality, virtue, professional ethics, and
honesty in an effort to promote development.

The Royal Government is committ3d to achieving the goal
of “Education for All” by ensuring equity in the attainment of nine
years of basic education for all children and ensuring access by the
children of the poor households to education, especially by improving
the quality and number of public education institutions and providing
more scholarships to poor students. The Royal Government will continue
to strengthen its partnerships with the private sector and the national
and international community to enhance and improve the quality of education
services, both in vocational and technical training and in higher education,
consistent with international standards and the development needs of
the nation.

The Royal Government will continue to increase budget
expenditures, and mobilize increased international assistance to enable
incentives for teachers, assure quality instruction; increase provision
of education materials, equipments, libraries and laboratories; and
build dormitories for students, especially female students; continue
to reform curricula and training programs; provide scholarships to poor
students; promote literacy and informal education programs; finance
construction of schools in the rural areas and support school operating
costs.

Side 2: Ensuring Enhanced Health Services

As stated in Strategic Plan for the Health Sector 2003-2007,
the Royal Government will increase the use of public resources and international
assistance and continue to encourage the participation of the private
sector to increase investment in the health sector that improves the
health status of the people. Priority will be given to the construction
of referral hospitals and health centers which can provide local health
services in an efficient, equitable and sustainable manner to all citizens,
especially the poor and vulnerable groups.

The Royal Government will continue to focus on the implementation
of prevention programs and combat communicable diseases and promote
maternal and child health care to reduce the maternal and infant mortality,
improve emergency services and provide health and sanitation education
and information, especially in the rural areas. The poor shall be entitled
to free health care in referral hospitals and health centers. Equity
funds designed to help the poor in accession quality of health care
services will be further strengthened and expanded.

The Royal Government is strongly committed to the adoption
and effective enforcement of health laws and regulations to ensure high
quality health services, medicines and food safety. The Royal Government
will continue to encourage the use of traditional medicines with appropriate
information and control in conjunction with the use of modern medicines.

Side 3: Implementation of Gender Policy

Women are the backbone of our economy and society and
the Royal Government has exerted its utmost efforts to improve the status
of women through implementation of the Strategic Plan of Neary Ratanak
or “Women are Precious Stones,” aimed at providing Cambodian women with
value and hope in life, while promoting gender mainstreaming. The main
objective of the program is to build the capacities of women and change
social attitudes that discriminate against women.

The Royal Government puts high priority on the enhancement
of the role and social status of Cambodian women by focusing attention
on the implementation of the Gender Strategy, capacity building for
women in all sectors, changing of social attitudes that discriminate
against women, and ensuring the rights of women to actively and equally
participate in nation building.

Indeed, all women have the right to health care, education
and skill training. They are entitled to the equitable distribution
of economic resources; equal opportunity to participate in socio-economic
development, and equitable legal protection and thereby enabling women
to avoid domestic violence and trafficking. Another important element
is the substantive participation of women at all levels in institutions
of governance.

Side 4: Implementation of Population Policy

Cambodia’s population is growing at about 2.4% per annum,
generating a continuing and heavy burden for production and job creation,
which is barely able to cope with current needs. The Royal Government
recognizes that the high rate of population growth increases poverty
as it increases the burdens on family income, increases the ranks of
the under-employed and unemployed, and contributes to the lowering of
wages as excess labor is not absorbed by the economy. Moreover, high
population growth increases pressure on water degradation and decreased
bio-diversity. In urban areas, high population growth increases pressure
on water distribution and sanitation and also worsens air quality. Moreover,
high population growth has worsened the incidence of land-related disputes
in rural areas and increased social problems in urban areas including
high population density, proliferation of infectious diseases and the
increase in crimes.

In sum, high population growth increases the demand for
public services, which in turn increases the burdens on the Government
finance and also constrains macroeconomic and social management. Therefore
the Royal Government will continue to actively implement a population
policy consistent with the Cambodian social and cultural context, with
the following priorities:

Support all couples and families to be free and accountable for
the decision on their desired number of children and birth control,
and ensure their access to information, education, service delivery,
and other means to fulfill their above decisions;

Reduce high rate of fertility and increase the use of birth spacing
services;

Reduce infantile and child morbidity and mortality, and maternal
mortality;

Reduce the adverse impacts of population pressure on the environment
and natural resources;

Strengthen the prevention of the HIV/AIDS epidemics; and

Consider population factors in all economic and social practices,
plans and programs at all levels.

In sum, the effective implementation of the population
policy will enhance poverty reduction, especially toward the achievement
of the Millennium Development Goals, which requires that each country
reduces poverty by half by the year 2015.

Conclusion

The Royal Government of Cambodia has devoted significant
time and tremendous efforts over the past decades to rehabilitate and
develop the nation from the ashes of genocide under the Khmer Rouge
and protracted wars, until the restoration of full peace, political
stability, law and order, democracy, respect of human rights and economic
stability, which have been positively recognized, both nationally and
internationally.

The Royal Government has implemented reforms in all sectors,
encountering enormous challenges, difficulties and obstacles. Since
the mid-1980s we have made the transition from central planning to the
dynamic market orientation, exerting sincere efforts to create the enabling
environment for Cambodia’s rapid integration into the regional and world
economy.

In the long run, the most formidable development challenge
faced by the Royal Government id the reduction of poverty and the improvement
of the livelihoods and quality of life of the rapidly growing Cambodian
population. The Royal Government clearly considers poverty as causing
tremendous economic waste and loss and also morally unacceptable and
causing social polarization. Therefore, the Royal Government set out
the National Poverty Reduction Strategy with the following key objectives:

Strengthen peace, stability and social order by implementing
concrete measures aimed at enhancing the rule of law, promoting
respect for human rights and democracy to create a political and
security environment conducive to sustainable development in the
long run;

Ensuring sustainable, high economic growth in the long run averaging
6%-7% per annum;

Ensuring equitable distribution of the gains from economic growth
among the rich and the poor, between urban and rural areas, and
between men and women; and

Promoting sustainable environmental management and use of natural
resources.

We reiterate that the Rectangular Strategy of the third
legislature builds upon the achievements gained under the Triangular
Strategy of the Second Legislature. Indeed, the Rectangular Strategy
is the economic policy agenda of the political platform of the Royal
Government in the third legislature of the national Assembly, formulated
as a comprehensive, consistent, intertwined and mutually-reinforcing
system,, which is easy to understand and implement. Indeed, the Rectangular
Strategy is an effective policy tool of the Royal Government to implement
the National Poverty reduction Strategy in the new mandate.

The Royal Government recognizes that Cambodia still has
a long way to go, and has to overcome numerous obstacles to achieve
long-term progress and prosperity for the country and people. Thus the
promotion of the harmonized efforts of the Cambodian people in poverty
reduction continues as the most important objective of the Royal Government,
as the third legislature of the National Assembly has come into office.
Indeed, the Royal Government recognizes that poverty and all its aspects
cannot be solved overnight, or in one month, or one year. However, with
a well-designed program and sincere, harmonized and combined efforts
and actions, the Royal Government will certainly achieve positive changes
in enhancing the living standards of people within the next four years.

The Royal Government appeals to all development partners
including the donor community, the private sector, non-governmental
organizations, civil society, and officials, civil servants in all ministries/institutions,
members of the legislative, executive and juridical branches, members
of the armed forces, the authorities at all levels and each and every
citizen to provide all necessary support, as well as actively participate,
in partnership with the Royal Government in the implementation of the
political platform and the economic action agenda of the Royal Government
for third legislature of the National Assembly, namely: “the Rectangular
Strategy for Growth, Employment, Equity and Efficiency in Cambodia.”

I would like to reaffirm that reform programs that we
have set out and highlighted now, are not meant to please anyone. It
is the imperative of Cambodia to serve the interest of Cambodian people
from all walks of life. I hope that after we walk out of this meeting,
all policies and measures we have developed and addressed before the
National Assembly and announced today will be translated into concrete
action plans, aimed at bringing about fruitful results in all sectors.
Especially, the outcomes will be explicitly reflected in the steady
improvement and enhancement of the living standards of our people, which
is the vital tool to measure the effectiveness of the Government’s work.

In fact, for the third legislature of the National Assembly,
we still have only four years to go, thus we really cannot take the
normal track. We must make our utmost effort to successfully expedite
the implementation of political platform, strategies, concrete reform
measures, which we have laid out to the best interest of our nation
and people. In this spirit, may I propose to the members of the Cabinet
to consider this first Cabinet Meeting as the dedication of our physical
force, intellectual energy and morality to the accelerated implementation
of the comprehensive and in-depth reforms for the poverty reduction,
progress, prosperity, and pride in the Kingdom of Cambodia.

Finally, may I wish Your Royal Highness Sdech Krom Khun,
Your Highnesses and distinguished Members of the cabinet, good health
and great success in your joint endeavors within the next four years
in your service for the Nation, Religion and King, the highest motto
of the Kingdom of Cambodia. I would like to declare the closing of the
Cabinet meeting.